Four out of every five investors do not know the difference between active and passive investments, new research from Invesco Perpetual has shown.
The research, undertaken by Gfk NOP on behalf of Invesco Perpetual, also revealed that investor knowledge was only three per cent greater than those people who had no investments at all.
Even when given a list of options for the correct answer only 22 per cent of investors picked the correct definition of a passive fund and 25 per cent defined an active fund.
Rick White managing director at Invesco Perpetual said: "The fact that so many investors do not know the difference between these two very different investment styles is extremely worrying.
"A lack of understanding when making investment decisions can result in the wrong choices and ending up with an imbalanced portfolio. Whilst we believe there is a place for both investment approaches within a portfolio, investors need to make informed decisions about the funds they are buying."
Mr White said more help needs to go into educating today's investors so that they understand exactly what they are placing their money in.
"There is certainly a strong role for advice as well as clearer information provision for the future – financial advice is a crucial element in improving understanding and buying/selling decisions for the majority of investors," he added.Click here for more information on investments
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